New York officials announced that the state’s “force-placed” insurance reforms will now cover 100 percent of the New York market after the New York State Department of Financial Services (DFS) reached agreements with the four remaining New York force-placed insurers that had not yet agreed to implement those reforms.
These four additional insurers are American Modern Insurance, Chubb, Fidelity and Deposit Company of Maryland, and FinSecure. These latest agreements come on the heels of regulators’ earlier settlements with Assurant and QBE announced in March and April respectively. Assurant and QBE control at least 90 percent of the force-placed insurance market in New York.
New York Gov. Andrew Cuomo’s administration said the reforms will help better protect homeowners from abuse; eliminate the kickbacks DFS uncovered in this industry; and save homeowners, taxpayers, and investors millions of dollars going forward through lower rates.
DFS’ settlement with American Modern Insurance includes a $1 million penalty and restitution for homeowners who were affected.
Chubb, Fidelity and Deposit Company of Maryland, and FinSecure – which had each written relatively smaller volumes of force-placed insurance and were not found to have engaged in the kickback arrangements uncovered at other companies – voluntarily agreed to sign proactive codes of conduct to implement reforms.
The force-placed insurance reforms include the following prohibitions:
- Force-placed insurers shall not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with the insurers.
- Force-placed insurers shall not pay commissions to a bank or servicer or a person or entity affiliated with a bank or servicer on force-placed insurance policies obtained by the servicer.
- Force-placed insurers shall not reinsure force-placed insurance policies with a person or entity affiliated with the banks or servicer that obtained the policies.
- Force-placed insurers shall not pay contingent commissions based on underwriting profitability or loss ratios.
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